Approval Standards for Financial Institutions Applying to Participate in Deposit Insurance Article 5

In the case where applying institutions encounter one of the following situations as a result of the CDIC's review, i.e., in the case where they do not conform to the insured qualifications, the CDIC shall report this to the competent authority or the central competent authority of agricultural finance to urge them to make improvements:1. The ratio of the equity capital to risk-weighted assets for banks and credit cooperatives, and the ratio of the net worth to risk-weighted assets for the credit departments of farmers' and fishermen's associations do not conform to the minimum requirement stipulated by the competent authority or the central competent authority of agricultural finance.2. Adversely classified assets exceed 1% of total assets.3. The total amount of collateralized loans outstanding to related parties exceeds 10% of net worth.4. Net worth is less than 90% of paid-in capital (operating capital for foreign banks; shares for credit cooperatives; the sum of enterprise funds and reserves for the credit departments of farmers' and fishermen's associations).5. In the event that laws and regulations have been violated, or corporate governance, internal control system, risk management system, internal audit system, operational strategy or other business operations are found to be unsound. In these cases, there may be an increase in insured risk as there is danger to the rights of depositors.6. If there is a concrete evidence that incumbent directors, supervisors, chief executive officers (general manager) and the heads of credit departments are incompetent and may harm the sound operations of financial business.The applying institution, in the event that none of the above items apply and it receives approval from the CDIC to become an insured institution, shall sign a deposit insurance agreement with the CDIC.